The democrats in congress are proposing taxing steel to fund part of the President's Build Back Better program. Analysts know that aluminum is a substitute for steel in many applications. Since steel is a rather heavy metal, the demand for steel is affected by transportation costs. Steel is also used in various household products such as appliances and autos. After gathering data and using regression analysis, these analysts produced the following demand function for steel. Q,- -568 + 40CG+ 12P, 2.5P, -0.25P Here, Q, is metric tons of steel per month (1 metric ton = 2204.62 pounds) in thousands, P is the price per metric ton of steel. 

CG is the percentage change in GDP from the last quarter. P is the price per pound of aluminum and P is the national average price of a gallon of diesel fuel. After gathering the latest data, you find that the percentage change in GDP from last quarter is 4% (4), the average price of a pound of aluminum is $1.50, and the national average price of a gallon of diesel fuel is $4.00. The analysts produced the following estimate of the supply function for this market. 0. =-2,300-12C -41 + 240B + 0.2 P Here, Q, is metric tons of steel per month (in thousands), P is the price per metric ton of steel, C is the price per metric ton of coking coal, I is the price per metric ton of iron ore, B is an index of business activity with the base value of 1 in 2015. After gathering the latest data, you find that the price per metric ton of coking coal is $180 the price per metric ton of iron ore is $120, and the current index of business activity stands at 1.25. 

 Find the current equilibrium price and quantity in this market.

 Find the equilibrium price and quantity in this market if the government imposes a $112.50 per ton tax on steel. 

What will happen to the price buyers pay per ton because of the tax? 

 What price will sellers actually receive (net price) per ton after the tax? D How much revenue will this tax raise for the government?

How much of the tax burden is borne by buyers? 

How much is borne by sellers?

What is the deadweight loss for society from this tax?

Answer rating: 100% (QA)

To find the current equilibrium price and quantity in the market we need to solve the simultaneous equations formed by the demand and supply functions The equations are as follows Demand function Qd 5... View the full answer